Tax and trust
Countries usually compete to provide the lowest income tax rates or base rates for corporate and expat taxes. Unless you're in the Netherlands which is offering an interesting new possibility: ‘Enhanced Supervision’.
As Secretary of State for Finance Jan Kees de Jager explains, Enhanced Supervision means that tax-paying companies can present their annual financial expectations in advance. Then, tax inspectors can offer them, “Certainty about their future tax treatment.”
The innovation means an end to one of the biggest uncertainties facing companies. Also, says De Jager, it means that, “Companies and tax authorities will deal with each other on the basis of mutual trust. That fits in with our desire to support the entrepreneur.”
Tax Trendsetter
Enhanced Supervision is the latest in a long line of Dutch tax innovations. For example, the first ever participation exemption scheme was launched here. A participation of 5 per cent or more in another company allows all income from shares or assets in that company to be enjoyed tax-free. In addition, the Netherlands has tax treaties with 85 countries to avoid double taxation.
Another tax milestone was the introduction of the popular 30 per cent ruling for expats. This allows non-Dutch employees to receive the first 30 per cent of their Dutch salary tax-free. In 2008, the cabinet reduced corporation tax to 20 per cent over the first €250,000 – a highly competitive rate in Europe.
But many successful Dutch tax measures have been copied abroad. So the Netherlands is keen to keep developing its unique tax profile. Enhanced Supervision plays a major role in this.
Success factors
De Jager emphasizes that the special position of the Dutch tax inspector makes Enhanced Supervision possible. Compared with his foreign colleagues, the inspector here has more freedom of action. “There is space within the legal frameworks to make arrangements,” says De Jager. “And we are working on having inspectors handle the same accounts for a long time. ” Companies do not have to switch to the new system in one go, but can opt for a phased approach.
Such innovations are boosting Dutch competitiveness in tax matters. “Two years ago, in the rankings of the tax attractiveness of various countries, we dropped to a middle position,” says De Jager. “Now, we are back on the right track again. On the last list, we were near to the top players. I am convinced that our position will improve. Certainly when it’s clear that having a relationship of trust with the local tax office really pays off.”
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Photo: Rahi Rezvani
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